No let up in Aussie RMBS market

Australia's residential mortgage-backed pipeline showed no sign of easing last week, with Pepper Homeloans, Bank of Western Australia (BankWest) and National Australia Bank (NAB) prepping deals, while Members Equity completed its first deal of the year.

Pepper, the non-conforming and subprime mortgage originator, has appointed Barclays Capital and Commonwealth Bank of Australia as joint leads on an A$350 million ($270.1 million) offering, to be issued via the Pepper Residential Securities Trust.

The same leads arranged Pepper's most recent outing, a A$300 million issue in June 2005. The latest deal - Pepper's fifth - takes the issuer's RMBS program beyond the A$1 billion mark.

Following roadshows scheduled for Australian, European and Asian cities, pricing is expected around May 25.

The deal is backed by 929 loans with an outstanding principal of A$223.8 million, average weighted LTV of 72.1% and seasoning of 3.5 months. The transaction employs a super senior structure with a call date of July 2011 and final maturity of 41 years.

Moody's Investor's Service and Standard &Poor's assigned triple-A ratings to the A$245 million super senior and A$48 million senior notes, which have an average life of 1.66 years apiece. The deal also features three subordinated tranches with ratings ranging from double-A to triple-B.

BankWest, meanwhile, marks its return after a four-year hiatus with a A$3.5 billion issue from the SWAN program. Deutsche Bank and Societe Generale are joint leads, with roadshows conducted last week in Hong Kong, Singapore, Brisbane, Melbourne and Sydney. Pricing is expected this week.

The deal is backed by a pool of 20,635 prime mortgages worth A$4.1 billion, with a weighted LTV of 70.5% and seasoning of 17.8 months. PMI provides 100% insurance cover for the portfolio.

Moody's and S&P have rated three 2.66-year senior tranches - denominated in U.S. dollars, Aussie dollars and euros - at the triple-A level. The A$112 million subordinated tranche is rated Aa2'/'AA', respectively.

Meanwhile, market sources said that NAB is planning to issue two deals totaling A$3.5 billion in the next month. The transactions are the first by the bank since a A$2.5 billion global offering in September 2004.

NAB is expected to launch this week a purely domestic A$2 billion public deal, on which it will be sole arranger and lead manager. Pricing is expected in the next couple of weeks.

The bank has also entered into a private arrangement with a single investor whereby it will issue A$1.5 billion over the next 10 years. The first offering from the program is due early next month.

According to one source, NAB's ability to issue such a large amount independently highlights where the Aussie RMBS market stands in the minds of investors. "You know the market is hot when a bank with a relatively small distribution team can get away [with] A$3.5 billion without bringing in one of the big investment banks," says the source.

Staying Down Under, Members Equity has completed a A$1 billion prime RMBS from its SMHL facility. Deutsche Bank and Macquarie jointly led the sale, with ABN Amro and Westpac co-managers.

The A$982 million senior notes, rated triple-A by Moody's and S&P, priced at the tight end of the indicative range, paying 14 basis points over the bank bills swap rate (BBSW) on a 2.85-year average life. The A$18-million sub piece, rated Aa2/AA, finished 18 basis points over BBSW for 5.9-years.